GlobeNewswire Inc | Jul 30, 2020 07:00AM EDT

July 30, 2020

NEWARK, N.Y., July 30, 2020 (GLOBE NEWSWIRE) -- Ultralife Corporation (NASDAQ: ULBI) reported operating income of $2.3 million on revenue of $28.6 million for the second quarter ended June 30, 2020. For the second quarter of 2019, the Company reported operating income of $3.0 million on revenue of $29.4 million.

Ultralifes second quarter adjusted earnings per share of $0.13 cents reflects the benefits of our end-market diversity and resilient business model in the face of continued business disruptions caused by the pandemic, said Michael D. Popielec, President and Chief Executive Officer. Our Battery and Energy Products medical sales and government/defense sales increased 72% and 50% year over year, respectively, and when combined with the contribution from SWE, nearly offset Communications Systems sales which were lower due to the completion of shipments on a major contract. Altogether, our second quarter performance reinforces our view that Ultralife is durably positioned both to sustain profitability and positive cash flow/liquidity through a period of economic weakness and to execute on initiatives to drive future growth opportunities.

Second Quarter 2020 Financial Results

Revenue was $28.6 million, a decrease of $0.8 million, or 2.8%, compared to $29.4 million for the second quarter of 2019, as a significant increase in battery sales across diversified end markets was offset by higher Communications Systems sales in 2019. Overall, commercial sales increased 7.5% and government/defense sales decreased 13.7% from the 2019 period. Battery & Energy Products revenues grew 18.4% to $24.0 million, compared to $20.3 million last year, reflecting a 71.7% increase in medical battery sales and a 49.8% increase in government/defense sales, partially offset by a 33.7% decline in oil & gas market sales. Communications Systems sales decreased 50.3% to $4.5 million compared to $9.1 million for the same period last year, primarily reflecting higher 2019 shipments of mounted power amplifiers to support the U.S. Armys Network Modernization initiatives under the delivery orders announced in October 2018. These orders were completed in the second quarter of 2020.

Gross profit was $8.0 million, or 27.9% of revenue, compared to $8.9 million, or 30.2% of revenue, for the same quarter a year ago. Battery & Energy Products gross margin was 25.1%, compared to 27.9% last year, reflecting incremental costs in 2020 associated with the transition of new products to higher volume production and supply chain disruptions relating to COVID-19. Communications Systems gross margin was 42.8%, compared to 35.3% last year, due to efficiencies and improved productivity in the production of vehicle amplifier-adaptor systems for the U.S. Army.

Operating expenses were $5.7 million compared to $5.8 million last year. Included in operating expenses for the 2019 quarter was $0.2 million of non-recurring expenses related to the acquisition of SWE. Operating expenses were 19.8% of revenue for both the 2020 and 2019 periods.

Operating income was $2.3 million compared to $3.0 million last year, and operating margin was 8.0% compared to 10.3% last year.

Net income was $1.7 million or $0.10 per diluted share using the U.S. statutory tax rate, compared to net income of $2.3 million, or $0.14 per diluted share for the second quarter of 2019. Adjusted EPS was $0.13 on a diluted basis for the second quarter of 2020, compared to $0.18 for the 2019 period. Adjusted EPS excludes the provision for deferred taxes which primarily represents non-cash charges of $0.4 million for U.S. taxes which will be fully offset by net operating loss carryforwards and other tax credits for the foreseeable future.

Adjusted EBITDA, defined as EBITDA including non-cash, stock-based compensation expense, was $3.3 million for the second quarter of 2020, or 11.6% of sales, compared to $4.1 million for the second quarter of 2019, or 13.9% of sales. For the trailing twelve-month period, Adjusted EBITDA was $11.6 million or 10.2% of sales.

See the Non-GAAP Financial Measures section of this release for a reconciliation of Adjusted EPS to EPS and Adjusted EBITDA to Net Income Attributable to Ultralife Corporation.

About Ultralife Corporation

Ultralife Corporation serves its markets with products and services ranging from power solutions to communications and electronics systems. Through its engineering and collaborative approach to problem solving, Ultralife serves government, defense and commercial customers across the globe.

Headquartered in Newark, New York, the Company's business segments include Battery & Energy Products and Communications Systems. Ultralife has operations in North America, Europe and Asia. For more information, visit www.ultralifecorporation.com.

Conference Call Information

Ultralife will hold its second quarter earnings conference call today at 8:30 AM ET. To participate in the live call, please dial (800) 915-4836 at least ten minutes before the scheduled start time, identify yourself and ask for the Ultralife call.A live webcast of the conference call will be available to investors in the Events & Presentations section of the Company's website at http://investor.ultralifecorporation.com. For those who cannot listen to the live broadcast, a replay of the webcast will be available shortly after the call at the same location.

This press release may contain forward-looking statements based on current expectations that involve a number of risks and uncertainties. The potential risks and uncertainties that could cause actual results to differ materially include potential reductions in revenues from key customers, acceptance of our new products on a global basis and uncertain global economic conditions. The Company cautions investors not to place undue reliance on forward-looking statements, which reflect the Company's analysis only as of today's date. The Company undertakes no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances. Further information on these factors and other factors that could affect Ultralifes financial results is included in Ultralifes Securities and Exchange Commission (SEC) filings, including the latest Annual Report on Form 10-K.

ULTRALIFE CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Dollars in Thousands)(Unaudited)

ASSETS

June 30, December 2020 31, 2019Current Assets: Cash $8,389 $7,405Trade Accounts Receivable, Net 26,405 30,106Inventories, Net 28,064 29,759Prepaid Expenses and Other Current Assets 2,144 3,103Total Current Assets 65,002 70,373 Property, Equipment and Improvements, Net 22,713 22,525Goodwill 26,459 26,753Other Intangible Assets, Net 9,250 9,721Deferred Income Taxes, Net 12,526 13,222Other Non-Current Assets 1,638 1,963Total Assets $137,588 $144,557

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities: Accounts Payable $7,766 $9,388Current Portion of Long-Term Debt 1,482 1,372Accrued Compensation and Related Benefits 1,382 1,655Accrued Expenses and Other Current 3,840 4,775LiabilitiesTotal Current Liabilities 14,470 17,190Long-Term Debt 9,284 15,780Deferred Income Taxes 501 559Other Non-Current Liabilities 999 1,278Total Liabilities 25,254 34,807 Shareholders' Equity: Common Stock 2,030 2,026Capital in Excess of Par Value 184,900 184,292Accumulated Deficit (50,113) (52,830)Accumulated Other Comprehensive Loss (3,296) (2,531)Treasury Stock (21,246) (21,231)Total Ultralife Equity 112,275 109,726Non-Controlling Interest 59 24Total Shareholders? Equity 112,334 109,750 Total Liabilities and Shareholders' Equity $137,588 $144,557

ULTRALIFE CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(In Thousands Except Per Share Amounts)(Unaudited) Three-Month Six-Month Period Period Ended Ended June June June June 30, 30, 30, 30, 2020 2019 2020 2019Revenues: Battery & Energy Products $24,036 $20,300 $44,797 $36,298Communications Systems 4,524 9,097 9,577 11,981Total Revenues 28,560 29,397 54,374 48,279 Cost of Products Sold: Battery & Energy Products 18,010 14,645 33,455 26,233Communications Systems 2,587 5,887 5,622 8,097Total Cost of Products Sold 20,597 20,532 39,077 34,330 Gross Profit 7,963 8,865 15,297 13,949 Operating Expenses: Research and Development 1,275 1,587 2,823 2,623Selling, General and Administrative 4,394 4,236 8,695 7,736Total Operating Expenses 5,669 5,823 11,518 10,359 Operating Income 2,294 3,042 3,779 3,590 Other Expense 117 83 209 141Income Before Income Tax Provision 2,177 2,959 3,570 3,449

Income Tax Provision 499 676 818 717 Net Income 1,678 2,283 2,752 2,732 Net Income Attributable to 20 27 35 51Non-Controlling Interest Net Income Attributable to Ultralife $1,658 $2,256 $2,717 $2,681Corporation Net Income Per Share Attributable to $.10 $.14 $.17 $.17Ultralife Common Shareholders ? Basic Net Income Per Share Attributable to $.10 $.14 $.17 $.17Ultralife Common Shareholders ? Diluted Weighted Average Shares Outstanding ? 15,882 15,742 15,880 15,741Basic Weighted Average Shares Outstanding ? 16,133 16,193 16,114 16,180Diluted

Non-GAAP Financial Measures:

Adjusted Earnings Per Share

In evaluating our business, we consider and use Adjusted EPS, a non-GAAP financial measure, as a supplemental measure of our business performance. We define Adjusted EPS as net income attributable to Ultralife Corporation excluding the provision for deferred taxes divided by our weighted average shares outstanding on both a basic and diluted basis. We believe that this information is useful in providing period-to-period comparisons of our results by reflecting the portion of our tax provision that will be offset by our U.S. net operating loss carryforwards and other tax credits for the foreseeable future. We reconcile Adjusted EPS to EPS, the most comparable financial measure under U.S. Generally Accepted Accounting Principles (U.S. GAAP). Neither current nor potential investors in our securities should rely on Adjusted EPS as a substitute for any GAAP measures and we encourage investors to review the following reconciliation of Adjusted EPS to EPS and net income attributable to Ultralife.

ULTRALIFE CORPORATION AND SUBSIDIARIESCALCULATION OF ADJUSTED EPS(In Thousands Except Per Share Amounts)(Unaudited)

Three-Month Period Ended June 30, 2020 June 30, 2019 Per Per Per Per Amount Basic Diluted Amount Basic Diluted Share Share Share ShareNet Income $1,658 $.10 $.10 $2,256 $.14 $.14Deferred Tax 391 .03 .03 641 .04 .04ProvisionAdjusted Net Income $2,049 $.13 $.13 $2,897 $.18 $.18 Weighted Average 15,882 16,133 15,742 16,193Shares Outstanding

Six-Month Period Ended June 30, 2020 June 30, 2019 Per Per Per Per Amount Basic Diluted Amount Basic Diluted Share Share Share ShareNet Income $2,717 $.17 $.17 $2,681 $.17 $.17Deferred Tax 633 .04 .04 636 .04 .04ProvisionAdjusted Net Income $3,350 $.21 $.21 $3,317 $.21 $.21 Weighted Average 15,880 16,114 15,741 16,180Shares Outstanding

Adjusted EBITDA

In evaluating our business, we consider and use Adjusted EBITDA, a non-GAAP financial measure, as a supplemental measure of our operating performance. We define Adjusted EBITDA as net income attributable to Ultralife Corporation before net interest expense, provision (benefit) for income taxes, depreciation and amortization, and stock-based compensation expense, plus/minus expenses/income that we do not consider reflective of our ongoing operations. We reconcile Adjusted EBITDA to net income attributable to Ultralife Corporation, the most comparable financial measure under U.S.GAAP. Neither current nor potential investors in our securities should rely on Adjusted EBITDA as a substitute for any GAAP measures and we encourage investors to review the following reconciliation of Adjusted EBITDA to net income attributable to Ultralife.

ULTRALIFE CORPORATION AND SUBSIDIARIESCALCULATION OF ADJUSTED EBITDA(Dollars in Thousands)(Unaudited)

Three-Month Period Six-Month Period Ended Ended June June June June 30, 30, 30, 30, 2020 2019 2020 2019 Net Income Attributable to Ultralife $1,658 $2,256 $2,717 $2,681CorporationAdjustments: Interest and Financing Expense, Net 106 114 280 119Income Tax Provision 499 676 818 717Depreciation Expense 582 515 1,161 962Amortization of Intangible Assets and 158 143 319 244Financing FeesStock-Based Compensation Expense 304 175 534 360Non-Cash Purchase Accounting - 205 - 205AdjustmentsAdjusted EBITDA $3,307 $4,084 $5,829 $5,288

Company Contact: Investor Relations Contact:Ultralife Corporation LHAPhilip A. Fain Jody Burfening(315) 210-6110 (212) 838-3777pfain@ulbi.com jburfening@lhai.com